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U.S. Securities and Exchange Commission

Litigation Release No. 20788 / October 22, 2008

Accounting and Auditing Enforcement Release No. 2895 / October 22, 2008

Securities and Exchange Commission v. Stephen P. Gardner, et al., Civil Action No. 04 CV 2002 JAH (RBB) (S.D. Cal.) (October 5, 2004)

FORMER PEREGRINE SYSTEMS PRESIDENT SETTLES SEC CHARGES FOR HIS ROLE IN CORPORATE ACCOUNTING FRAUD

The Securities and Exchange Commission (“Commission”) announced today that on October 20, 2008, United States District Judge John A. Houston approved the Commission’s settlement with former Peregrine Systems, Inc. (“Peregrine”) president Gary L. Lenz. The Commission’s action, filed in 2004, charged Lenz with, among other things, securities fraud, in connection with his participation in a revenue inflation scheme with other senior officers of Peregrine, a San Diego software company that has since been acquired by Hewlett-Packard Company. To settle the Commission’s case, Lenz agreed to pay a $110,000 civil penalty and to be barred from serving as an officer or director of any public company.

The Commission’s complaint includes the following allegations: Lenz joined Peregrine in 2000, and later that year became company president. To meet Peregrine’s revenue forecasts, senior company officers exploited relationships with third parties by entering into sham reseller agreements with them. Lenz participated in some of these fraudulent agreements, including one for approximately $500,000 and another for approximately $1 million. Lenz knew, or was reckless in not knowing, that Peregrine was improperly recording revenue on the agreements. Lenz also helped arrange for an agreement to be backdated so that Peregrine could improperly record approximately $3 million in revenue in the wrong quarter. After engaging in these activities, in April 2001 Lenz signed a letter that misrepresented to Peregrine’s independent auditors that the company’s financial statements were in accordance with generally accepted accounting principles.

In January 2008, Lenz entered a guilty plea in a related criminal case in the Southern District of California. He pleaded guilty to one count of making materially false statements to the FBI, in violation of 18 U.S.C. 1001. Lenz was sentenced to three years probation, a $5,000 fine and 200 hours of community service.

In addition to the financial penalty and officer and director bar, without admitting or denying the Commission’s allegations, Lenz agreed to be enjoined from violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934, and Exchange Act Rules 10b-5, 13b2-1 and 13b2-2; and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Exchange Act Rules 12b-20, 13a-1 and 13a-13.

The Commission acknowledges the assistance of the U.S. Attorney’s Office for the Southern District of California and the FBI.

Additional materials: Litigation Release Nos. 18919 and 20449.

 

http://www.sec.gov/litigation/litreleases/2008/lr20788.htm

Modified: 10/22/2008